Promissory Estoppel Hypo Forum

[SwampRat88]

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[SwampRat88]

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[bport hopeful]

I dont think without consideration.

[Icculus]

Okay, so we just started this, but it in this particular case I do not see how X's reliance was to his detriment. He has not given up any rights or choices and he has not been financially harmed. I would say that there is no promissory estoppel here. I am sure someone else can give a better answer, but I would say part four is not satisfied: no detriment.

Edit: From what I have read, I don't think many, if any, courts would grant estoppel here.

[SwampRat88]

Okay, so we just started this, but it in this particular case I do not see how X's reliance was to his detriment. He has not given up any rights or choices and he has not been financially harmed. I would say that there is no promissory estoppel here. I am sure someone else can give a better answer, but I would say part four is not satisfied: no detriment.

Edit: From what I have read, I don't think many, if any, courts would grant estoppel here.

Good points. However, what about the 3-4 months seeking investors. That seemed like a detriment to me, if only because of the wasted time.

[SwampRat88]

I dont think without consideration.

Promissory estoppel doesn't require consideration. In fact, lack of consideration is not a defense to P/E but rather a prerequisite.

[whuts4lunch]

I think consideration would be shown and this would be a contracts case and not a promissory estoppel case. However, if we say that there was no consideration, promissory estoppel may apply, but could only be invoked if there was damage for the justified reliance, so that the party harmed can be made whole. I don't think having gone through the trouble of securing financing would be enough to sue on to get something very substantial, such as specific performance of the contract, or possibly for anything. If there is no damage, there can be no promissory estoppel. I don't think a court would give damages for the 3-4 months of searching effort, but I suppose its possible.

After writing the above, I read your second post. Seems that we mostly agree.

[SwampRat88]

I think consideration would be shown and this would be a contracts case and not a promissory estoppel case. However, if we say that there was no consideration, promissory estoppel may apply, but could only be invoked if there was damage for the justified reliance, so that the party harmed can be made whole. I don't think having gone through the trouble of securing financing would be enough to sue on to get something very substantial, such as specific performance of the contract, or possibly for anything. If there is no damage, there can be no promissory estoppel. I don't think a court would give damages for the 3-4 months of searching effort, but I suppose its possible.

After writing the above, I read your second post. Seems that we mostly agree.

Curious as to where you see the consideration in the purported option contract. Are you adopting the Restatement 87(1) view, which permits a purported recitation of consideration to be sufficient consideration in option contracts? According to my professor, that is the minority view.

Instead, professor said that most courts adopt the common-law view that actual consideration is required in option contracts, just like any other contract.

[bport hopeful]

I dont think without consideration.

Promissory estoppel doesn't require consideration. In fact, lack of consideration is not a defense to P/E but rather a prerequisite.

I meant that there would be no option without consideration in this case. aka no promissory estoppel

[#1gunna]

Clearly not promissory estoppel because there was no reliance by X. Arguably P.E. if he had cancelled his own lease or sold his business to finance the purchase. W made an offer, but probably not an assurance that could substitute for an enforceable promise.
See Posner's holding in Garwood Pkg. v Allen & Co.

[Scabcab]

The remedy for PE is limited to reliance damages. Performance of the promise is not required. X might be able to recover any expenses in connection with securing the financing.

[Magnolia]

Wouldn't X have to believe that there was an actual contract in order to recover under PE? X didn't accept the offer, so there was no promise for him to rely on and therefore no grounds for recovery. It wasn't a firm offer, so W was within his rights to rescind the offer before it was accepted. If X relied on W not rescinding the offer before the end of the 3 months, that sucks, but reliance on an offer isn't the same as reliance on a promise.

[SwampRat88]

Wouldn't X have to believe that there was an actual contract in order to recover under PE? X didn't accept the offer, so there was no promise for him to rely on and therefore no grounds for recovery. It wasn't a firm offer, so W was within his rights to rescind the offer before it was accepted. If X relied on W not rescinding the offer before the end of the 3 months, that sucks, but reliance on an offer isn't the same as reliance on a promise.

"...an option contract not supported by consideration is merely an offer to sell, which may be withdrawn by the offeror at any time prior to acceptance by the offeree. However, the doctrine of promissory estoppel may serve as a substitute for traditional consideration in support of an option contract. If proof of an express contract fails for lack of consideration, but refusal to enforce a party's promise would be unjust because of the plaintiff's reliance upon it, promissory estoppel is the appropriate theory of recovery. It is an equitable doctrine that may be employed for the enforcement of promises that are noncontractual and otherwise unenforceable."

Seems to imply the difference is irrelevant in this context?

[AVBucks4239]

1L disclaimer, but having already done promissory estoppel, my two cents:

If this was an exam question, the issue is obviously whether X can use promissory estoppel to enforce the contract, but THE issue (as already pointed out) is whether or not X relied to his detriment. That is where you will be able to argue both sides and score points.

Argue for X that he relied to his detriment, probably spent lots of time and some money trying to find investors, acted in reliance, these actions manifested consideration, etc. For W, argue that all of this wasn't really a detriment, very minimal financial burden, lacked consideration, etc. Talking it through and thinking for both sides will usually lead you to the right answer.

In this case, I agree with the others that the detriment wasn't significant enough to use promissory estoppel. But even if the court were to find X relied to his detriment, W is only liable for reliance damages and not performance of the contract. Thus, your conclusion in this scenario is way less important than the analysis you would have done above.

[Renzo]

There's no promissory estoppel issue here, because there was no detriment reliance; X is no worse off than before X and W met. The only issue is whether or not this is a valid option contract, and you've assumed that away.

[Hippononymous]

The remedy for PE is limited to reliance damages. Performance of the promise is not required. X might be able to recover any expenses in connection with securing the financing.

I don't think this is entirely true...

My professor mentioned that a lot of courts look at the "promise" in PE as indicating "expectation". I tend to doubt that the court would honor the expectation interest in this case, but there may be cases where they do (i.e. cases where the expectation is non-speculative and requires no calculation; a promissory note for $5,000, for example). I don't know for sure, but I cannot fathom a court ordering specific performance in a PE case.

[piccolittle]

To my mind, in this scenario there is no reliance to X's detriment. He/she may have had it in mind when attempting to find funding etc, but unless X can show an expenditure in reliance or a concrete missed opportunity, the court will have no basis upon which to provide a remedy. PE is usually invoked where there is a failure of consideration, and the promisee's reliance on the "contract" will be deemed to constitute consideration. Here, X did not accept the offer, did not provide consideration for a firm offer, and did not rely to his or her detriment (barring any other facts not mentioned).

[lawyerwannabe]

As an exam question, you would want to argue it both ways. However, I think people here are too quickly dismissing the idea that X may have a claim under promissory estoppel.

In relying on the document W signed, X spent time and money in seeking and securing investors to buy the building, expecting the opportunity to buy the building would not close until the date specified. Also, over this three month period, in relying on the document W signed, X forbear looking to buy another building instead of W's building. Thus, when notified during the period that X thought he had the opportunity to buy the building that W was selling it to someone else, he detrimentally relied on the document W signed because he did not look for other buildings he could have purchased.

As to addressing the fourth element of promissory estoppel that OP mentioned in the second post:

I believe that justice could only be served by ruling for damages for X for the following reasons:
- W did not have to sign the document
- If the ruling did not hold that promissory estoppel was applicable, a person selling a building could sign as many documents similar to this as he/she wanted to and have no ramifications when the parties relied on them (it would simply be bad, inefficient business)
- In the same vein, if X could not have assurance that the building would be available to him to buy during that three months, he may never have spent the time and money to seek and secure investors to buy the building. W should want promissory estoppel to be invoked as a matter of principle. People like X may never buy W's building if they did not have assurance it could be bought if they upheld their end of the bargain. Thus, W may never be able to sell his building at all because people would be too weary to seek and gather investors, expending time and money, knowing that their labors may prove unfruitful.

[whuts4lunch]

I think consideration would be shown and this would be a contracts case and not a promissory estoppel case. However, if we say that there was no consideration, promissory estoppel may apply, but could only be invoked if there was damage for the justified reliance, so that the party harmed can be made whole. I don't think having gone through the trouble of securing financing would be enough to sue on to get something very substantial, such as specific performance of the contract, or possibly for anything. If there is no damage, there can be no promissory estoppel. I don't think a court would give damages for the 3-4 months of searching effort, but I suppose its possible.

After writing the above, I read your second post. Seems that we mostly agree.

Curious as to where you see the consideration in the purported option contract. Are you adopting the Restatement 87(1) view, which permits a purported recitation of consideration to be sufficient consideration in option contracts? According to my professor, that is the minority view.

Instead, professor said that most courts adopt the common-law view that actual consideration is required in option contracts, just like any other contract.

An option can be purchased for nominal consideration. Nominal consideration is a formality and doesn't have to actually be given. The language "for valuable consideration" satisfies the formality of consideration.

I suppose I may be adopting a restatement's view, but I just answered according to my own understanding.

[RPK34]

Argue for X that he relied to his detriment, probably spent lots of time and some money trying to find investors, acted in reliance, these actions manifested consideration, etc. For W, argue that all of this wasn't really a detriment, very minimal financial burden, lacked consideration, etc. Talking it through and thinking for both sides will usually lead you to the right answer.

Just a heads up: don't use terms like consideration in a promissory estoppel case. Promissory estopell exists absent a consideration.

[SwampRat88]

Argue for X that he relied to his detriment, probably spent lots of time and some money trying to find investors, acted in reliance, these actions manifested consideration, etc. For W, argue that all of this wasn't really a detriment, very minimal financial burden, lacked consideration, etc. Talking it through and thinking for both sides will usually lead you to the right answer.

Just a heads up: don't use terms like consideration in a promissory estoppel case. Promissory estopell exists absent a consideration.

Well, true.

But to put it even more precisely: the absence of consideration is a prerequisite in promissory estoppel.

[Icculus]

As an exam question, you would want to argue it both ways. However, I think people here are too quickly dismissing the idea that X may have a claim under promissory estoppel.

In relying on the document W signed, X spent time and money in seeking and securing investors to buy the building, expecting the opportunity to buy the building would not close until the date specified. Also, over this three month period, in relying on the document W signed, X forbear looking to buy another building instead of W's building. Thus, when notified during the period that X thought he had the opportunity to buy the building that W was selling it to someone else, he detrimentally relied on the document W signed because he did not look for other buildings he could have purchased.

As to addressing the fourth element of promissory estoppel that OP mentioned in the second post:

I believe that justice could only be served by ruling for damages for X for the following reasons:
- W did not have to sign the document
- If the ruling did not hold that promissory estoppel was applicable, a person selling a building could sign as many documents similar to this as he/she wanted to and have no ramifications when the parties relied on them (it would simply be bad, inefficient business)
- In the same vein, if X could not have assurance that the building would be available to him to buy during that three months, he may never have spent the time and money to seek and secure investors to buy the building. W should want promissory estoppel to be invoked as a matter of principle. People like X may never buy W's building if they did not have assurance it could be bought if they upheld their end of the bargain. Thus, W may never be able to sell his building at all because people would be too weary to seek and gather investors, expending time and money, knowing that their labors may prove unfruitful.

I disagree that X is worse off than before since he has now secured the financing and could conceivably purchase another building. If he cannot get a building for the same price he may be able to sue for the difference he paid, but X has not really lost anything here. Also, X was not prevented from looking at another building since in the original contract X did not promise to buy the building nor did he promise not to buy another building. X could have gathered the money and bought another building and then maybe W would have a case for promissory estoppel if he did not sell because he was relying on X and X didn't buy.

If this were an exam question I would agree with arguing X lost time, money, etc., but if it;s just a question of if promissory estoppel applies I would say no.

[Younger Abstention]

A minority of courts will allow expectations damages for PE remedy.

As far as this case goes, where's the detriment?

[lawyerwannabe]

A minority of courts will allow expectations damages for PE remedy

Which is why I still like my argument.

As far as this case goes, where's the detriment?

The lost opportunity to secure the right to buy another (similar) building.

Note: I am not saying my argument in this thread would win over a judge. I am saying it is an argument to make on an exam as to why promissory estoppel may apply.

[Renzo]

A minority of courts will allow expectations damages for PE remedy

Which is why I still like my argument.

As far as this case goes, where's the detriment?

The lost opportunity to secure the right to buy another (similar) building.

Note: I am not saying my argument in this thread would win over a judge. I am saying it is an argument to make on an exam as to why promissory estoppel may apply.

Don't make this argument on an exam. There is no detriment.